Sky will be a broadband heavyweight

YESTERDAY, Sky launched itself into the free broadband market with the same kind of impact that Pavarotti would have jumping into a kids paddling pool. Now, the arrival of another ‘free' broadband supplier is not new. In fact, they're like flies in summer: very common and very annoying but with the upside that they will nearly all be dead by Christmas.

Most free broadband services start like most failed relationships: looked like a good deal, full of promise that quickly turns sour, thanks to poor servicing and support and there's no way out without enduring a significant amount of emotional or financial hardship. At least with broadband, you get to keep the dog.

Sky's entry though was a lot bigger and more aggressive that the market watchers had expected. In fact, I think that's one of the key reasons it will succeed in becoming a major player in a relatively short space of time.

Ever since it bought out ISP Easynet, it was on the cards that Sky would launch a broadband service. It was also no surprise that it would try and capitalise on its existing TV viewers. After all, if mobile phone suppliers can do it….

What no one really saw coming though was the scale of the operation. After all, it's not every new broadband supplier that offers free 2MB broadband to eight million TV subscribers. That's right, unlike most of Sky special offers, you don't already have to subscribe to Digital TV or Sky Sports 1-to-452 etc. Etc. etc. Any TV subscriber can avail of the offer. First though, let's clear up the free bit: apart from the £40 connection fee, the 2MB broadband is free. Always a catch - but not the worst. If you opt for the £5 per month 8MB service, the connection fee falls to £20 and if you really want to beef up that porn collection, you can opt for the 16MB unlimited broadband for a very low £10 per month, and connection is free.

So, free broadband for most Sky TV subscribers will cost something after all, but it seems like a small price to pay. £40 for 2MB with limited downloads for a year is not bad. BT and NTL charge around £18 per month upwards for their basic offerings, which is not cheap, even with no connection fee.

However, to concentrate on the pros on cons of various service contracts is to miss the big picture and I run the risk of you all killing yourselves. Sky is throwing £650 million at this over the next two years. There's £250 million up front with another £400 ear-marked for expansion. This is much higher than anyone thought. So much so that the share price dropped by over 4 per cent on the news, as nervous shareholders collapsed in a faint, and not because of the heat wave. Sky ‘guestimates' that 2.4m of its 8m customers will opt for its broadband and that by 2010 it will be profitable. Assuming that some of them are tied into 12-month contracts with other broadband suppliers, it might be next year before the real take-up starts.

Sky really had no choice but to get into this market. BT is planning to get into TV via broadband, as are many others so it makes sense that Sky is building the barricades now by offering broadband to its TV customers. After all, Sky has its own problems. It loses 800,000 TV customers a year but broadband could help cut that number as Sky offers more services. Free broadband is a good place to start. And don't forget what's coming next. Downloadable movies are on the horizon and Sky is making damn sure it's not left on the platform when that gravy train pulls out. It has no intention of losing TV share and download revenues to some broadband TV upstarts.

While I believe this is a good move for Sky I think, more importantly, that it's good for UK consumers. Something like this on this big a scale is exactly what's needed to finally get the big players to stop charging far too much for far too little. Competitors have already been heard grumbling about the ‘hidden connection charges' and it's “not really free” etc. but, that's spoiler flannel. They know this is trouble. Big trouble. And big trouble for them means good news for us. Expect to see a lot of changes to rival broadband offerings in the coming months. Lots of good changes. µ